PSD in Practice: a Follow-Up

PSD in Practice: a Follow-Up

Update on PSD transposition

According to latest information provided by the European Commission as well as by national banking communities, 24
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Member States have now completed the process of bringing the PSD into force via national law. This remains outstanding in the following six countries:

Estonia has completed its transposition but a "grace period" is in place which is due to last until 22 May

Sweden has revised its projected go-live date from 1 April 2010 to 1 July 2010

Finland has also revised its projected go-live date from 1 May 2010 to 1 July 2010

The go live dates for Greece, Iceland, and Poland still have to be clarified

To help banks manage the fact that there continue to be different legal regimes in place across
, the banking industry's PSD Expert Group identified best practices recommended for adoption by banking communities in countries still awaiting transposition of the PSD into national law. Details on these recommendations were outlined in the article "PSD in Practice" published in the previous edition of the
Newsletter. A link to this article is included below.

PSD in practice - emerging issues

Inconsistent practices emerging under the new regime in countries that have transposed the PSD into national law were initially attributed to being a consequence of the market going through an inevitable period of adjustment, and thus were expected to be of a transitional nature. However, six months after go-live of the PSD in most
Member States, there is a concern that several such inconsistent practices might possibly become the norm in some cases. To ensure full compliance across the entire market so that all bank customers can realise and appreciate the full benefits inherent to this legal harmonisation exercise, banks need to resolve the following issues which have occasionally been observed in the PSD environment:

Inconsistent usage - and handling - of charging options (OUR/SHA/BEN) due to differing interpretations of the PSD's requirements: it is clear that SHA1 is now the default and best practice approach for all
payments.

Significant and/or unexpected deductions/lifting fees applied by beneficiary banks without having clearly agreed such deductions in advance with their customers. In such cases, the beneficiary of a payment receives a lesser amount than expected. As a result, the originator of the payment, e.g. employers, for example, may be asked by their employees (the beneficiary) to compensate for the deducted amount. However, it is the responsibility of the beneficiary's bank to agree with its customer any charges it deducts from the original amount being transferred by the originator.

New "non-STP" fees or "SHA-claims" being levied by some beneficiary banks: With regard to so-called "non-STP" fees it may serve the interests of transparency and predictability to have a common definition of the term "non-STP" in the PSD context2. With regard to so-called "SHA-claims" levied back up the payment chain by some beneficiary or intermediary banks, it needs to be recalled that the PSD intends to establish transparency of pricing for customers and banks and the idea is not to re-introduce the same principle under SHA as used to exist for OUR3.

Next steps of the PSD Expert Group

The banking industry's PSD Expert Group continues to monitor the status of PSD transposition across the 30
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countries as well as emerging issues in the live PSD environment. The results of this exercise are reported regularly in this Newsletter.

The Expert Group will shortly publish a supplement to its existing PSD Guidance document covering the following topics:

Derogation usage and gold-plating on a country-by-country basis; e.g. implementation of diverging options that are not explicitly prohibited by the PSD but create legal and practical inconsistencies across markets

Existing market best practice with regard to various PSD-related topics, including the usage and handling of charging codes

Additional clarifications and best practice proposals relating to a number of core PSD concepts and scope where there is evidence pointing to a lack of consistent interpretation or understanding in the market to-date

Suggested best practice principles regarding return transactions under the PSD

A link to the first edition of the PSD Guidance Document is included below.

Ruth Wandhöfer chairs the PSD Expert Group and is a member of the
Plenary.

Related article in previous issue:

1 The "Share" (SHA) principle means that the originator and beneficiary of a payment are charged separately and individually by the originator bank and beneficiary bank. This is to ensure that charges are not deducted from the amount of the payment. The basis and level of charges to customers are entirely a matter for individual banks.

3 The "OUR" charging principle stipulates that the sending party (originator) pays the charges levied by the originator and / or the beneficiary bank and / or an intermediary bank with the result that the beneficiary is credited the full amount.

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In this article

To-date, bringing the Payment Services Directive (PSD) into force via national law remains outstanding in six countries of the European Economic Area (
). Banks therefore still have to deal with the fact that differing legal regimes remain in place in
. Inconsistent practices emerging where the PSD is now fully in place might pose a further challenge to the intended legal harmonisation of the European payment landscape. Ruth Wandhöfer gives an update on the PSD implementation status and several PSD concepts which could benefit from further clarification.

Alain Hiltgen

EPC Office Holder / Payment Security Support Group Chair

Payment Security Support Group Chair
Head of Business Security Advice, Executive Director, UBS AG